U.S. Getting More Serious About a TikTok Ban

Happy Monday! Taco Bell announced the other day it’s going to bring back its ‘90s-era “Volcano Menu.” 

We know what you’re thinking, and no, the name doesn’t refer to the physiological response it elicits.

Quick Hits: Today’s Top Stories

• In a deal brokered by the Swiss government, UBS agreed Sunday to a more than $3 billion takeover of foundering rival Credit Suisse, the first merger of such a scale since the 2008 financial crisis. Swiss authorities agreed to provide more than $9 billion to cover any losses UBS incurs following the transaction and a $100 billion line of credit to facilitate the takeover. The failure of Silicon Valley Bank earlier this month put a spotlight on Credit Suisse’s already weak accounts, and regulators brokering the takeover wanted to avoid a messy bankruptcy and panic spreading to other banks.
• Silicon Valley Bank parent company SVB Financial Group has filed for Chapter 11 bankruptcy, reporting about $2.2 billion in cash and liquid securities, $3.3 billion in bond debt, and $3.7 billion of preferred stock. The move would enter SVB Financial into a court-directed selloff process of the company’s surviving subsidiaries.
• The International Criminal Court on Friday issued a largely symbolic arrest warrant for Russian President Vladimir Putin—and Russian children’s commissioner Maria Lvova-Belova—for the alleged war crime of deporting Ukrainian children to Russia. Ukrainian President Volodymyr Zelensky said Ukraine is investigating the forced removal of more than 16,000 children from the country, while Russian officials dismissed the warrant out of hand. Over the weekend, Putin visited both Russian-occupied Crimea and Mariupol, an eastern Ukrainian city largely destroyed during Russia’s months-long siege.
• The deal allowing export of Ukrainian grain through Black Sea blockades has been extended for another 120 days despite initial Russian resistance, Ukraine announced Saturday. Ukrainian Infrastructure Minister Oleksandr Kubrakov said 25 million tons of Ukrainian grain have already been exported under the deal since its adoption last July.
• Turkey and Hungary announced Friday they will approve Finland’s NATO accession bid, clearing its path to membership in the defensive alliance. Finland applied together with Sweden after Russia launched its full-scale invasion of Ukraine, but Turkey has opposed Sweden’s bid, accusing it of supporting Kurdish terrorists.
• French police arrested more than 500 people over the weekend amid ongoing protests—and riots—sparked by President Emmanuel Macron’s decision on Thursday to push through pension reforms raising the country’s retirement age without a vote in the National Assembly. Macron’s government faces a no-confidence vote today but will likely survive the challenge, clearing the way for the change to become law. Labor unions have called for continuing strikes.
• North Korea tested a suspected short-range ballistic missile Sunday amid ongoing joint military exercises around the peninsula by the United States and South Korea, including an aerial exercise Sunday. North Korea has completed a barrage of similar tests in recent months, including firing an intercontinental ballistic missile Thursday.
• Republican Gov. Mark Gordon of Wyoming on Friday signed into law a ban on abortifacients—the first such measure explicitly banning the pills. Wyoming’s ban penalizes physicians and distributors with up to six months in prison and a $9,000 fine, but prohibits criminal prosecution of women attempting chemical abortions and includes exceptions for treating a natural miscarriage or if the woman is in “imminent peril that substantially endangers her life or health.” Fifteen other states have extra safety restrictions on abortion pills and 13 include them in broader abortion bans, according to the pro-abortion access Guttmacher Institute. Guttmacher estimates medication abortions account for just over half of abortions in the United States.
• Former President Donald Trump claimed on Saturday he expects to be arrested Tuesday in connection with Manhattan District Attorney Alvin Bragg’s investigation of hush money payments Trump allegedly made to adult film star Stormy Daniels ahead of the 2016 election. A Trump spokesperson clarified the former president hasn’t received official notification of an imminent arrest and said the former president plans to rally in Texas next weekend. In a Truth Social post, Trump encouraged his supporters to “protest” his impending arrest and “take our nation back.” Bragg sent a note to DA staffers over the weekend telling them their safety was his “top priority” and that he will not tolerate “attempts to intimidate our office or threaten the rule of law in New York.”
• YouTube on Friday lifted restrictions on Trump’s channel that were imposed after the January 6 Capitol riot, when the company said he’d violated policies against inciting violence. The video streaming platform’s decision to reinstate Trump follows similar moves by Facebook, Instagram, and Twitter after Trump became an official political candidate again. The former president swiftly posted a video announcing his return to YouTube and Facebook.

Tick, Tock, Tick, Tock

The editors of this newsletter have been writing about the prospect of a TikTok ban for nearly—let us check our notes—three years. Maybe this time it will take.

The Biden administration has issued an ultimatum to TikTok, according to a Wall Street Journal report late last week: Oust your Chinese ownership or get out of the country. The Committee on Foreign Investment in the United States (CFIUS)—a body that reviews international transactions for potential national security risks—has reportedly informed TikTok of the conditions and, while details of the ultimatum have not been publicly released, the news comes as bipartisan scrutiny of the social media platform is reaching a fever pitch.

Republican and Democratic lawmakers alike have criticized the Biden administration in recent weeks for dragging its feet on TikTok, leading a handful to take matters into their own hands—sort of. Earlier this month, a bipartisan group of senators introduced the RESTRICT Act—legislation that would provide a framework for the Commerce Department to review and block foreign transactions involving companies hailing from a handful of adversarial countries. “Today everybody’s talking about TikTok,” Democratic Sen. Mark Warner of Virginia said when announcing the legislation. “But before there was TikTok there was Huawei and ZTE, and before that there was Russia’s Kaspersky Lab.” 

“We need a comprehensive, risk-based approach that proactively tackles sources of potentially dangerous technology before they gain a foothold in America, so we aren’t playing Whac-A-Mole and scrambling to catch up once they’re already ubiquitous,” he added. 

The White House backed the proposal. “This legislation would empower the United States government to prevent certain foreign governments from exploiting technology services operating in the United States in a way that poses risks to Americans’ sensitive data and our national security,” said Jake Sullivan, Biden’s national security advisor.

But before news of the CFIUS decision leaked, some Republican lawmakers expressed skepticism of their colleagues’ RESTRICT Act, arguing it wouldn’t explicitly ban TikTok and could be used as a shield for further inaction from the White House. “What this bill does is it gives them the ability to say, ‘Congress passed something, and it’s bipartisan,’” said Sen. Marco Rubio, who has introduced his own bill targeting TikTok with GOP Rep. Mike Gallagher and Democratic Rep. Raja Krishnamoorthi. “It gives the illusion of action, but it’s not action.”

The skepticism isn’t entirely unfounded. The RESTRICT ACT would empower Secretary of Commerce Gina Raimondo to make any final determination on TikTok, and she’s thus far been far from forceful on the subject. “Passing a law to ban a single company is not the way to deal with this issue,” she told Bloomberg last month. “However much I hate TikTok—and I do, because I see the addiction in the bad s— that it serves kids—you know, this is America.” Raimondo also made reference to the potential political fallout: “The politician in me thinks you’re gonna literally lose every voter under 35, forever.” The Biden administration has repeatedly courted TikTok influencers in its efforts to reach younger Americans on issues from COVID-19 vaccines to the Inflation Reduction Act.

But the reported CFIUS decision—alongside recent measures prohibiting the app on government devices—seems to indicate the White House is growing more hawkish on the issue, with nothing short of full Chinese divestment preventing TikTok from being banned nationwide. An executive order Biden signed in September 2022 encouraging CFIUS to consider additional “national security factors” like data security in its review process may have been a preview of the decision.

Gallagher and Krishnamoorthi—the chairman and ranking member of the House’s new select committee on China, respectively—said reports of the decision were “encouraging” and reaffirmed their views of the danger posed by the app: “TikTok under its current ownership and control structure, is an unmitigatable threat to our national security and needs to be dealt with as such.”

For a quick refresher, here’s what we wrote in late December:

China’s authoritarian system dictates that Chinese tech companies must turn over user data whenever the CCP asks, leading to fears the Chinese government could surveil the location data and viewing habits of military or intelligence officials, for example, or alter the algorithm to push China-friendly content. “The Chinese government could [control] data collection on millions of users or control the recommendation algorithm,” FBI Director Chris Wray warned Congress in November. “[This] could be used for influence operations if they so chose, or to control software on millions of devices, which gives it an opportunity to potentially technically compromise personal devices.”

Skeptics shoot back that, although China-based employees have accessed U.S. user data, there’s no public evidence—yet—that the CCP has demanded U.S. user data. They’ll also argue a lot of American user data is already for sale, and that plenty of non-Chinese-owned platforms have proven effective vectors of misinformation campaigns. Facebook, for example, has capitalized on security concerns over TikTok to downplay its own aggressive data collection habits.

But although TikTok insists it stores Americans’ data on servers outside China, a steady drumbeat of revelations in recent months hasn’t exactly smoothed security hawks’ ruffled feathers. This summer, Buzzfeed reported that China-based TikTok employees had repeatedly accessed U.S. user data and that former ByteDance employees claimed the company had used its now-defunct news app, TopBuzz, to push pro-China propaganda and censor negative stories. Forbes reported this fall ByteDance had planned to use TikTok to monitor specific U.S. citizens’ locations, and noted that the app allowed unlabeled Chinese state media to share videos criticizing U.S. political candidates ahead of the midterms. Just last week, Forbes and the Financial Times revealed ByteDance had accessed certain journalists’ TikTok data in an effort to track their locations and find out if employees met with the reporters to leak information.

According to a Forbes report last week, the Justice Department has opened an investigation into TikTok’s alleged tracking of U.S. journalists, and the FBI is also conducting an inquiry.

Over the past few months, more than half of state governments and a dozen universities have restricted or banned TikTok on school and government devices. A swath of other countries and jurisdictions have followed suit in recent weeks including the U.K., Belgium, Denmark, New Zealand, and the European Union. Last fall, ByteDance disclosed that its employees outside of Europe, including those in China, could access European user data.

While opponents of banning the app claim there’s still no evidence of the Chinese Communist Party itself accessing user data, top law enforcement officials have noted it may be difficult to find a smoking gun. “We’re not sure that we would see many of the outward signs of it happening if it was happening,” Wray testified earlier this month at a Senate Intelligence Committee hearing. “This is a tool that is ultimately within the control of the Chinese government and to me it screams out with national security concerns.”

In an effort to stave off a ban or a sale, TikTok has sought to assuage regulators’ data security concerns—with little success. CFIUS has been reviewing TikTok since 2019, and the company has proposed a $1.5 billion plan to submit to oversight from a government-approved panel and erect a data firewall for U.S. users called Project Texas—a nod to Austin-based Oracle, the company that would theoretically house the American user data.

“A change in ownership would not impose any new restrictions on data flows or access,” said Maureen Shanahan, a spokesperson for TikTok. “The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing.”

Former TikTok employees have argued the company’s U.S. data security plan is insufficient. One, who spoke under the condition of anonymity with the Washington Post, has met with lawmakers and claimed there are deficiencies in Project Texas that would still leave U.S. users’ data exposed. 

It remains to be seen whether a forced sale or ban could actually be implemented. The Trump administration’s moves targeting the company were ultimately blocked in federal court, and the logistical challenges of banning the app would be significant, requiring the cooperation of third parties like app stores, internet service providers, and cloud computing companies. “There won’t be action from CFIUS as a result of this review that will be taken against third parties that are not a part of this transaction,” Shannon Reaves, an expert in CFIUS compliance, told CNBC.

More details will likely surface this week. TikTok’s CEO Shou Zi Chew is set to testify before the House Energy and Commerce Committee on Thursday morning. Maybe he’ll come prepared with a fun little viral dance for lawmakers.

Worth Your Time 

• Inside Old Station Subs in Phoenix, Arizona, Joe and Debbie Faillace are trying to be kind and keep the shop open. Outside, residents of one of the nation’s largest homeless encampments—Shina Sepulveda, Brandon Mack, and hundreds of others—cope with violence, mental illness, and addiction. “[The Faillaces have] bought an extra mop to clean up the daily flow of human waste, replaced eight shattered windows with plexiglass, installed a wrought-iron fence around their property and continued opening their doors at exactly 8 each morning,” Eli Saslow reports for the New York Times. Meanwhile, Kipp Polston, 65, had in the last year “lost his business to heroin addiction, his apartment to eviction, and his truck to an accident,” Saslow writes. “Now he was working to get clean, leaving his tent at 5:30 each morning for an appointment at a methadone clinic before riding the city bus to businesses all across Maricopa County. He was trying to piece his life back together one window at a time, washing each for $3.”
• Pong—the table tennis-themed arcade game—was introduced to the American public 50 years ago this month. It changed the world. “Atari became a huge company in the wake of Pong’s success,” Charles Russo reports for SFGATE. “Its trajectory and legacy over the next decade is a colorful and turbulent story involving myriad lawsuits, iconic products, corporate takeovers and all manner of classic games. Locally, its offbeat and unorthodox workplace is often considered a precursor of modern Silicon Valley office culture. At one point, Atari even employed young Steve Wozniak and Steve Jobs to help develop the classic game Breakout prior to the duo founding Apple Computers. Present-day industry juggernaut Activision was originally founded in 1979 when a group of disgruntled Atari employees defected to start their own boutique video game company. In late 1982, the New York Times cited Atari’s $2 billion in sales to declare it ‘probably the fastest growing company in the nation.’ All told, Atari was in many ways the early embodiment of the modern Silicon Valley narrative: groundbreaking innovation, unconventional business strategy and — most notably — the profound impact of integrating technology into our lives (namely in the form of the culturally ubiquitous Atari 2600 home gaming system).”

USA! USA! USA! 

Presented Without Comment 

Also Presented Without Comment

Also Also Presented Without Comment

March Madness Update

After an incredible weekend of games, we’ve got a dogfight at the top of the TMD pool standings. Leaderboard to come tomorrow!

Toeing the Company Line

• In the newsletters: Jonah discusses why we need labels and what happens when we misuse them, Nick wonders (🔒) if Ron DeSantis is paying for Donald Trump’s foreign policy sins, and Chris reviews (🔒) Biden’s improving political fortunes over the past year.
• On the podcasts: Jonah delivers a curmudgeonly diatribe on Vice President Kamala Harris, the dangerous mirage of “new” ideas, Silicon Valley Bank, the difference between an explanation and an excuse, and whether or not he wears a toupee.
• On the site this weekend: Douglas Ollivant made the case for visiting Iraq, Guy Denton bemoaned the wasted potential of Scream VI, Isaac Schorr finished reviewing season four of You, and John Guaspari tackled the PGA Tour docu-series Full Swing. 
• On the site today: Harvest and Price look into a congressional effort to protect Social Security and Kevin writes on Joe Exotic’s presidential bid and the power of celebrity in American politics.

Let Us Know

Do you think Commerce Secretary Gina Raimondo’s concerns about prohibiting a specific company from operating in the country hold water? Would banning TikTok represent a departure from the American tradition of open markets, or a much-needed step to protect national security?